Above the Border

Perhaps you haven’t given much thought to greenhouse growers north of the U.S. border, but you should.

After all, 60 percent of the vegetables produced in British Columbia, for example, are exported to the United States, according to the BC Greenhouse Growers’ Association, and growers there are building operations on this side of the border to avoid high carbon taxes.

On the other side of the country, the majority of Ontario-grown vegetable growers are exporting to the U.S. as well.

And on both coasts, many plant producers are opting to ship internally rather than to the U.S. to save on paperwork as they face a weakened U.S. dollar, which could create opportunities for U.S. growers to fill those product voids.

In some ways they face a lot of the same issues you do with weather issues, finding good labor, competing with big-box retailers, reducing energy costs and dealing with Central American cuttings. Some of those issues are amplified for them, such as the weather. But on the other hand, things like the down economy that we face here in the states hasn’t affected them as much.

Greenhouse Management dug in and talked to Canadian greenhouse growers and experts about the challenges they face with the changing dollar, attracting interest to the industry, finding labor and reducing energy costs.

Changing dollar and new competition
Imagine if your bottom line dropped by 20 percent – even though you did everything the same way you always had, but it was because of circumstances you had no control over.

Welcome to Canada and just one of the many issues our greenhouse neighbors to the North face. As the U.S. dollar has weakened in recent years, it’s cut away at Canadian growers’ profits, as many of them ship to the Eastern and Western seaboards of the United States.

“We had a weaker dollar, so if I sold for $1 U.S., I would receive back Canadian $1.20, $1.30, $1.40, $1.50, and I got $1.60 even sometimes,” says Otto Bulk, founder and owner of Rosa Flora Ltd. in Dunnville, Ontario. “And because I live in Canada, that would be a nice bonus, of course, but that’s gone. There are a lot of things not working in our favor right now.”

Michiel Verheul, owner of High Q Greenhouses in Morinville, Alberta, and president of the Alberta Greenhouse Growers Association, says that evening value with the U.S. dollar is having an even bigger impact on other growers across the country.

“What happens is a lot of the coastal growers, they ship a lot into the U.S. – charging an 80-cent dollar and getting an American dollar – 20 percent more,” Verheul says. “Now all of a sudden, the dollar is at par, and that product is still being shipped, but not South, but East and West. Now these growers that are normally experiencing decent sales are, all of a sudden, competing with these growers that said, ‘I was growing a Canadian basket for $5 Canadian, and I was getting $7 because I was going South, so I’ll ship it West and get $5 and collect the $5 instead of going across the border with paperwork and a few other things.”

With that product staying within Canada, it puts more pressure on smaller growers.

“It compounds the stress because there’s a relatively short distance from West or East coasts coming to other places,” Verheul says. “That stuff coming into the Wal-Marts is pretty nice. If you get there on the right day into Costco, Wal-Mart, Home Depot, Lowe’s, the stuff looks really nice. Fortunately, large boxes don’t know how to look after it, but if they ever did find a way to look after it, we’d be in trouble because it’s very nice product.”

Competition with those big-box retailers is another issue Canadian growers face, especially those in the more remote areas away from the larger hubs.

Patricia Ross-Slomke is the owner and general manager of New North Greenhouses in Sault Ste. Marie, Ontario, about 800 kilometers away from the hub of Toronto and a 20-minute drive from the closest city. There, she and her Garden Center Manager Susan Richards have to find ways to attract customers to their center as opposed to heading to a big-box retailer.

“One thing a garden center can work at is when the spring sales are over, keep the quality in good shape,” Richards says. “That’s where the chain stores fall behind. They don’t maintain, and when people come looking in late July, if it’s in good shape, it will sell. People will come out and buy a good quality product because it’s not going to look like something that’s three-quarters dead.”

They also invest annually in bringing in a designer who has his finger on the pulse of what’s current in decorating and uses hard goods and their plants to create beautiful displays. These displays have won them awards from Landscape Ontario three years in a row, and it creates a buzz that people don’t get by visiting big-boxes.

“They have a wow factor so people are champing at the bit so they can see what their vision is,” Ross-Slomke says. “It always causes me some anxiety because I can see the wages going into producing that monumental display, but it does set us apart from the other sector.”

Finding interest on both sides
For 23 years, Linda Delli Santi grew beefsteak tomatoes, and through a series of circumstances, she eventually shut it down and switched to growing red bell peppers for seven years. But as she and her husband got older, she faced a challenge that many Canadian greenhouse growers are dealing with these days.

“None of the kids were interested,” she says. “My husband worked off the farm, and I ran the farm. He was home every night, but he did the maintenance, and I got tired of climbing to the tops of tanks to see if there was water or trying to get a valve open. He built tools to make it easier, but I got tired of hauling ladders around. I just got older and wanted to move on to something else.”

So she got out of the greenhouse and now serves as executive director of the BC Greenhouse Growers’ Association and chair of the Canadian Horticulture Council’s greenhouse committee.

But her story is one that’s all too common across Canada and just one of the many challenges growers must deal with.

“That challenge is a big one,” says Verheul. “How are we going to get them to take over? If you can make oodles of money in the oilfield or health care, are you going to? It has to be a lifestyle. It has to be something that you want. … Most of us have lived frugal, and our kids don’t want that anymore. They don’t want to wait 20 years until the house is paid off so they can go traveling or go out to dinner once or twice a week. They don’t want to wait.”

This creates an aging work force with no exit strategy, and even if someone can find a buyer, they assume a risk that they’ll lose payments each year if that grower doesn’t succeed. To alleviate this risk, Verheul says that Farm Credit Canada, a national agriculture lending organization, created succession programs that allow growers to sell their operations to a buyer, and the bank guarantees they’ll continue to get payment year after year, even if the new owner fails or goes under.

“It’s an ideal package,” he says. “People should be flocking up here to take advantage.”

But it’s not just getting the younger geneneration interested in working the greenhouses and farms – it’s getting them interested in planting and gardening too.

“Not only do these people want to work somewhere else, but they also don’t want to plant the same way as the baby boomers used to, and they’re willing to travel farther to get a deal,” Verheul says. “They’re shopping convenience. They’re shopping in a place that has everything – garden center as well as household items. They’re not working here and they’re not shopping here.”

Ross-Slomke agrees it’s an added challenge that growers and garden centers haven’t faced in the past.

“Right now, a lot of our customers are not gardeners,” she says. “It’s not like 10 years ago when all their parents and grandparents knew about gardening. This younger generation is decorators – they like to have a nice house, and they like to have a nice outdoors, but they don’t have an interest in real hardcore gardening like previous generations. If we can give them good information for a nice-looking but simple landscape and make sure it’s successful when they try it, then we’re doing things well. They’ll keep coming back because they get the good advice.”
 

Energy issues
When energy prices spiked to between $12 and $14 a gigajoule a few years ago, Bulk knew he had to make some changes to his greenhouse operations, so he started heating his 2 million square feet of greenhouse space with wood pallets. The initial investment to make the switch cost him a couple million dollars, but it’s saved him about $1 million a year the past few years.

Delli Santi says that in British Columbia about 11 years ago, many were paying as high as $18 to $20 a gigajoule, and many of her growers started looking at wood, coal and biomass.

The added problem in her province, though, is the carbon tax on growers, which will be $1.50 a gigajoule this coming July 1. For example, a five-acre greenhouse would pay about $50,000 a year in carbon tax.

“Our whole sector in British Columbia … the calculation is we contributed $6 million to the carbon tax at our 2011 size, so that’s another huge input cost on energy that’s causing us a lot of grief,” Delli Santi says.

Natural gas prices have gone down significantly and are about $3.50 a gigajoule now, but the carbon tax remains the same – making it about 45 percent of the cost of the actual gas. When BC started this tax, it was hoping to be a trailblazer and that other countries would follow its lead, but they haven’t.

“It put us at a huge competitive disadvantage,” Delli Santi says. “I can go up the road to the local Wal-Mart and find peppers that have come from Mexico or some place in the United States, and their carbon footprint to get it to my local Wal-Mart is quite big, trucking and all that, but not a penny of carbon tax has been paid. And then [our growers] try to compete with them in the same store, and [they] can’t.”

As a result, many of the large growers are building new facilities in the United States to avoid the carbon tax.

“Partially that’s because they want complimentary production to when they’re growing here, but if the climate in BC were better economically, they may not have built such big facilities down there – we’re talking in the $200 million range,” she says.
 

Labor costs and finding labor
In Ontario, growers struggle to keep up with labor costs.

“Three years in a row, the minimum wage went up $1 a year,” says George Gilvesy, general manager of the Ontario Greenhouse Vegetable Growers organization. “We had a 30 percent increase in the minimum wage over a three-year period. It was a very significant shock to a lot of the sectors that rely on minimum wage.”

With minimum wages across the country ranging between $9.50 and $10.75 by year’s end, it’s not only a challenge with the increasing cost, but growers also have trouble finding Canadians to work for these wages.

“Who’s going to work for $10 an hour?” Bulk says. “We would like it, but if I’m honest and truthful, the person for $10 an hour, he has to really scrape the barrel here in Canada. It’s very hard – you have to have, for sure, two people working – husband and wife.”

Some growers have to shell out more money to get the workers they need.

“You can’t keep good people at minimum wage, so you’re paying over and above that,” says Delli Santi. “Agriculture isn’t something that you go to the grocery store and say, ‘Oh, that costs a bundle to grow – I don’t mind paying that price.’ Everybody wants cheap food, so you don’t recover that cost.”

As a result, many growers have turned to foreign workers. In BC, Delli Santi says Indian immigrant workers have helped the labor force for years.

“The unfortunate thing about that is that all immigrant families, they want better for their children, so their children are all getting university degrees, and they’re getting older, so we started seeing our labor force dwindling,” she says.

But the big help to these labor issues has been the Seasonal Agricultural Worker Program (SAWP) the government created, which is an agreement between the Canadian and Mexican governments that allows Canada to bring in Mexican workers for up to eight months.

“The Americans are quite envious of our foreign labor policy and our foreign labor package,” Verheul says. “As far as I know, there are no illegal foreign workers in our country, from Mexico particularly.

Through the program, a business requests how many workers it needs, for how long its needs them and the type of worker it wants. The government lines it up for them, and growers have up to two weeks to decide if they want to keep any worker, so they aren’t stuck with bad employees.

They get health exams before they leave Mexico and go through extensive screening before they come and after they return home. The grower has to fill out an evaluation of that employee’s performance at the end, and during their stay, they have to provide housing as well as transportation to and from work, the grocery store and the airport. Growers also pay for their airfare to and from Canada.

Then the next year, they can request the workers they’ve had before, and those workers can accept, or they can decline and keep themselves open for another possible employer.

“This person shows up every day, he does whatever you ask him without complaining,” Verheul says. “Whoever I talk to who uses foreign workers is just ecstatic.”

All of these challenges hit different provinces and different growers in varying degrees, but it’s a snapshot look at some of the problems Canadians face. Some of them are different than what U.S. growers deal with, but you may find the principles of some of these challenges aren’t so different from your own.